Advanced Global Trading sold at least US$25 million of voluntary carbon credits as investments

Two articles about Advanced Global Trading were published at the end of last week. One by Vivian Nereim, a journalist with The National, an Abu Dhabi English-language newspaper, and one by Farah Halime a journalist based in Cairo.

AGT answered questions from both journalists. Charles Stephenson, AGT’s chief executive, toldThe National that AGT has about 1,000 clients. Since the minimum investment is US$25,000, that means AGT has sold at least US$25 million of near worthless voluntary carbon credits.

UPDATE – 30 July 2013: Today, a colleague referred me to a June 2012 article in which Stephenson said that the “average balance” of AGT’s “clients” was US$150,000. If we assume that this figure was the same in June 2013 (and that Stephenson isn’t making the figures up), AGT would have sold a total of US$150 million voluntary carbon credits.

Stephenson insists that no client has ever lost money. He told The National that,

“Our process is you buy on our platform and you sell on our platform. The price on our platform hasn’t gone down.”

But the reality is that clients cannot sell on AGT’s Trading Platform. “Ahmed” (not his real name) toldThe National that he spent US$100,000 on Advance Global Trading’s voluntary carbon credits. When he bought the carbon credits, AGT told him that he could sell the credits in one week. Ahmed has now waited four months for AGT to find a buyer. Recently, an AGT representative told Ahmed he had found a potential buyer. But there was a catch. The AGT representative encouraged Ahmed to buy more credits because the buyer wanted 10,000 credits and Ahmed has only 7,000. Ahmed declined.

Four months ago, Hany Shohdy spent US$25,000 on AGT’s credits. He has a question for AGT:

[I]f you already knew there were so many people trying to sell and they were not able, why did you call me three or four months ago and tell me there was a huge demand and prices were going to be so high?”

Another AGT client has been trying to sell his credits since February 2013. “I think I was blinded by greed,” he told The National.

In her article about AGT, Farah Halime reports that several AGT employees have recently jumped ship: Nick O’Dwyer (ex-director at AGT), Franklin Connellan (head of investments at AGT) and Amine Benkaddour (senior investment consultant at AGT).

Halime received a statement from AGT, in which the company denied that it told clients that the price of voluntary carbon credits is about to crash. Two commentators on REDD-Monitor say that they were contacted by AGT and told the market is about to crash to US$3/ton. When REDD-Monitor asked Charles Stephenson about this, the company’s statement sent in response failed to answer this or any of the other questions about AGT’s operations.

AGT in Dubai has not ceased operations and continues to operate in Dubai out of its headquarters in Emaar Square, Downtown Burj. The UK company that was shut down has no relationship with any client (contractual or otherwise) of Advanced Global Trading in Dubai. Please note there may be many companies globally using the name “Advanced Global Trading” but the AGT trademark is licensed only to the entity operating in Dubai. Therefore, there are no additional monies being sought from clients (or otherwise) with the company having been shut down as you suggest.

AGT has instituted a relatively new product (Strategic Earth Metals) which it offers to its interested clients. Despite what has been blogged, such new products are not being forced onto anyone. AGT has offered as an option for its carbon clients to trade into the new product upon commercial terms and conditions which are transparently described to any interested client. All of which shall be pursuant to a sale and purchase agreement between any interested client and AGT. Thus, no one is being strong armed to take this option. Any clients that do will be pursuant to their investment decision at their sole discretion.

Regarding the pricing of carbon, there has not been any price crash as suggested in the blogs. AGT is currently doing a survey amongst its clients who have shown an interest in exiting out of their carbon position to determine what new price, if any, should be assigned to carbon credits. End of the day, any price for carbon is meaningful if a buyer can be found at such price. AGT has no plans to unliterally bring the price of carbon down.

We have always done everything we can to protect the interests and investments of our clients and will continue to do so.

But Andrew Ager, a UK-based carbon markets consultant, has some bad news. Ahmed’s credits came from an HFC-23 project in China. HFC-23 is a greenhouse gas that is 14,800 times more damaging than carbon dioxide. It is produced as a by-product in the manufacturing process of HCFC coolant gas. The carbon credits were generated when the HFC-23 by-product was destroyed. These projects generated huge numbers of very cheap carbon credits.

HFC-23 carbon credits have been controversial for many years. Since the beginning of May 2013, these HFC-23 credits have been banned from the EU Emissions Trading Scheme. The EU described the credits as “a perverse incentive” to manufacture more HCFC coolant, which was precisely what had been happening in China. In April 2013, the Montreal Protocol reached a deal with China to phase out HCFC production.

“Given the controversy surrounding these credits,” Ager toldThe Nation, “I cannot see why any private or public company would entertain the thought of using them to offset their carbon footprint.”

So much for AGT’s claim to be doing everything it can, “to protect the interests and investments of our clients”.

$25,000,000 – Wow! I would say that you have seriously underestimated this figure, and here’s why.

Agt employed a “loading team” whose job it was to re contact investors once they had sat on their credits for a month or two and seen some “returns” – basically seen the price increase on their on-line trading platform.

The loading team – headed up by a gentleman called Ryan Singlehurst, or Ryan Smith or Harry Singlehurst (depending on who he wanted to be for the day), were tasked with getting their current investor base to re invest at a much higher level, on the basis that they were all ready seeing significant return on their small entry level investment.

In this way investors typically re entered the market at trades that were 4 to 5 times their initial investment level. So a “punter” who entered at $25,000 would typically reload at maybe $100,000 to $150,000, and in some cases even a lot more

So, do the maths……1000 clients, let be conservative and say 30% of clients re invested at $100,000 thats $30,000,000 !

As a note, the original selling price was actually $15,000. A year later anyone who had not gone up to $25,000 was told that is was mandatory if they wanted to keep their credits. Then clients were shown a significant growth in their investment so invested even more than the $25,000.
AGT says that they are not strong arming anyone but telling people that they most likely are going to lose a large chunk of cash and then telling them that the only way not to do it is to put it somewhere else but ONLY on their terms is bullying plain and simple.

AGT sold me some Carbon credits back in 2010, while the money went to Dubai, and the sales note was signed by their agent from Dubai, they refuse to recognise the credits saying it was a UK transaction. The AGT operation is a massive fraud.

REDDisms:

“Compared to the economic incentives for coal mining, the monetary values associated with conservation benefits derived from the park ecosystems are miniscule. Kutai National park is an extreme example of how much local stakeholders can financially gain from abandoning the park and how few incentives there are in support of conservation.”